Renters Left Out of Housing Bailout

The Obama administration’s housing plan leaves one group out in the cold: renters.

The government plan would allow some homeowners to refinance even if they don’t have equity in their homes, while it would subsidize the cost of lower monthly mortgage payments for borrowers at risk of default.

That has upset some who sat out the housing boom and rented, only to see taxpayers come to the rescue of some homeowners who are in over their heads. On average, renters have had higher housing payments as a share of income than homeowners did as a whole before the recession began, says housing economist Thomas Lawler.

Unemployment is also highest among age groups most likely to rent: unemployment reached 12.9% for 20-24 year old workers in February, and 8.7% for 25-34 year old workers, compared to a national average 8.1% unemployment rate.

Still, home price declines have ushered in housing affordability that is near its lowest level in decades in several housing markets. The stimulus bill enacted last month offers an $8,000 tax credit for first time home buyers and expands funding for rental programs offered through the Department of Housing and Urban Development.

And more help could be on the way for renters who now face eviction because their landlords have gone into foreclosure. In Congress, Rep. Keith Ellison (D., Minn.) has introduced a bill that would require anyone who buys a property at a foreclosure sale to give a tenant 90-days notice before eviction.

Freddie Mac has also finalized its guidelines that will allow non-owner tenants to continue renting in homes that have gone into foreclosure on a month-to-month basis. Freddie will also allow owners who have lost their homes to foreclosure to rent the homes under similar leases.